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#3 Keeping infrastructure projects on track: Lessons from New South Wales
134 Plays1 year ago
Infrastructure projects the world over start with the best intentions, but rising costs and ‘analysis paralysis’ often mean their full potential goes unrealized. This is a common theme in every country, but have some been able to develop strategies to help stay the course and deliver benefits for all?
In this episode of ‘Voices of the Industry’ Steer’s market lead for transportation strategy and business case analysis in North America, Patrick Miller, speaks to Ingrid Emery, Executive Director of Biodiversity and Conservation for the New South Wales (NSW) Department of Planning and Environment as she talks about the innovative approach to infrastructure assurance in this Australian state.
A focus on risk assessment, use of independent experts for assurance reviews, and repeated use of business cases throughout created a thorough assessment process to keep projects on track throughout their lifecycle. Are there some notes for North American planners to take?
Key takeaways
- Using a project lifecycle can enable transparent decision making
- Using business cases throughout a project lifecycle can help to navigate decision making
- Using a dedicated assurance function can minimise risk
- Integrating the public and decision makers into development helps to avoid surprises
Guests
- Ingrid Emery, serving as the Executive Director of Biodiversity and Conservation at the NSW Department of Planning and Environment, brings nearly two decades of experience. Her prior role involved leading water infrastructure development, ensuring access to safe drinking water for regional towns. Ingrid holds degrees in Economics and English Literature from the University of Melbourne, showcasing a versatile background.
Host
- Patrick Miller, Steer’s Transportation Strategy and Business Case Market Lead in North America.
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Transcript
Introduction to Mega Project Decision Making
00:00:08
Speaker
Hello and welcome to Voices of the Industry, a podcast series bringing you leading industry voices who challenge thinking across transportation, infrastructure and cities.
00:00:27
Speaker
Today on Voices of Industry presented by STEER, we have the opportunity to talk to Ingrid Emery, who works in water infrastructure in New South Wales and has played a number of roles across the infrastructure planning process. The theme of today's Voices of Industry presented by STEER is on decision making, assurance, and development of mega projects.
00:00:43
Speaker
This is a topic that will certainly be relevant to listeners across North America involved in the public sector, maybe as a sponsor, a planner, working in the product development or delivery, or even project funding, as well as the general public who might be interested in how decisions might be made elsewhere. My name is Patrick Miller. I lead Steer's transportation strategy and decision support team
Lessons from Australia's Infrastructure Frameworks
00:01:00
Speaker
out of Toronto. We work across North America with clients in Canada and the United States at all levels of government on similar topics that those will be talking about today.
00:01:08
Speaker
Ultimately, our goal of today's podcast is to explore what we can learn from Australia on the development of decision-making frameworks, assurance frameworks, and product development frameworks for transportation infrastructure projects. Infrastructure projects all begin with tremendous promise, but as they develop, an all-too-common story can play out. Costs are higher than expected, which causes scope choices to be made to maintain affordability and manage those cost increases.
00:01:31
Speaker
However, these scope changes can also erode benefits and result in the product that does not meet its original desired outcomes. And as the product shifts to delivery, there might even be further changes when aim of optimizing with respect to cost and avoiding getting stuck in analysis paralysis by trying to further augment benefits. This all in all limits opportunities for improvement. Around the world, we see the story play out with infrastructure projects. However, different agencies and governments have started to develop processes and decision frameworks to maximize benefits.
00:01:58
Speaker
control costs, and avoid falling into analysis paralysis. Today, we will look at an emerging practice from New South Wales and Australia and see what key lessons we can learn from North America.
Guest Introduction: Ingrid Emery
00:02:08
Speaker
We're lucky to be joined today by Ingrid Emery, who brings extensive experience across water infrastructure and other types of infrastructure in the New South Wales context across all stages of the project lifecycle, spanning project development through to business case making, decision making, assurance, and other elements of making sure projects are the right project delivered the right way.
00:02:27
Speaker
Welcome today, Ingrid. Great to have you. Thank you. It's great to be here. Picking things off, can you share a few of your reflections on infrastructure development and some of the key challenges I mentioned previously, that notion that more often than not, we see extreme cost escalation, which sometimes is responded to with reducing scope and reducing benefits ultimately. So taking sort of a broader perspective, research from the University of Oxford has actually shown that nearly 12,000 projects that they've
00:02:54
Speaker
analyse only one in two projects meet their budget. Only one in 12 met their budget and their schedule. And only one in 200 met budget and schedule and benefits. And Australia is not unique in some of those
Challenges in Australia's Infrastructure Projects
00:03:07
Speaker
challenges. In Australia, we've actually got a huge pipeline of projects at the moment with over 400 projects valued at over $100 million currently in planning or delivery. And of that, around 170 projects are valued at over a billion dollars.
00:03:20
Speaker
We've seen some success stories, but we've certainly seen some challenges with these projects with recent construction cost inflation spanning from 10% and anywhere up to 50%. We've seen redesigns of projects that have met challenges and having to re-look at the scale. So certainly within Australia, we've had project challenges in terms of
00:03:45
Speaker
cost escalation that we've seen recently and also that then flows on to how we scope up and design the projects where there's government starting to look for ways to reduce the scope and hence reduce the benefits.
00:04:00
Speaker
It's quite startling to hear about that research from Oxford you mentioned that out of the 12,000 projects, only 1 in 200 met budget, schedule, and benefits. I think that speaks to the central challenge that we're exploring today that the original scope and plan for these projects can often be challenging to deliver as we understand more about the risks and requirements to fully deliver these projects.
00:04:19
Speaker
With respect to the context you shared about Australia and the state of New South Wales, it's quite startling to hear about the size of the pipeline. There's a significant amount of development going on across all types of infrastructure that you articulated there, but a significant size of problem coming with that with the significant inflation you mentioned. One of the things I found doing some bit of background research on New South Wales is that despite those challenges, the government's been able to deploy a series of processes, policies, and tools to help curb those challenges while making sure that benefits get enabled.
00:04:48
Speaker
You mentioned in our previous conversations leading into this podcast that there are four key insights from New South Wales that we want to consider in the North American context. The first being the use of a project lifecycle to make transparent decisions and keep the project on track with respect to costs and benefits.
00:05:04
Speaker
benefits. Throughout that lifecycle, using business cases to navigate major decisions, especially during product design where there can be that pressure to cut scope or modify scope to control costs at the loss of benefits.
Insights on Project Transparency and Public Integration
00:05:15
Speaker
Third, the use of a dedicated and independent assurance function to minimize risks while ensuring the credibility of the product development process. And fourth, the notion of integrating the public and decision makers into product development seamlessly to minimize surprises and improve transparency.
00:05:30
Speaker
It could be useful today to talk about some of these key processes used by New South Wales government, primarily because they resemble some of the practices being used in North America. However, they have reached a degree of development that maybe exceeds what we might see across North America, thinking about the processes government has adopted, or at least have some different features or elements that may be interesting to project sponsors, decision makers, or individuals playing that assurance function in the North American context.
00:05:54
Speaker
Speaking of north america there are ranges of life cycle approaches used by different governments and agencies how are they may very significantly for those listening in from across canada in the united states what you hear today about new south wales may might not necessarily fit directly in your contacts but i certainly found exploring the stock of english there's a range of practices that can help us augment what we do and maybe some of them might even be able to be imported more directly.
Understanding Infrastructure New South Wales' Assurance Role
00:06:19
Speaker
Ingrid, could you start and tell us a bit about how New South Wales uses their standard project lifecycle to support decision making and product development?
00:06:27
Speaker
Yeah, of course. So I might step back and really frame the way that Assurance is set up in New South Wales. So we have an independent agency called Infrastructure New South Wales that is responsible for Assurance across all projects and they report, that agency reports directly to the Premier of the state. The way that the Assurance function works in New South Wales is it's risk-based.
00:06:50
Speaker
So all capital projects with a value of over $10 million must be registered with Infrastructure NSW, but the level of assurance that applies to each of those projects varies by the level of risk assessed on those projects. The highest risk projects have the most level of assurance and the most reporting, but the lowest level of
00:07:10
Speaker
risk projects have a very, very light touch. There are seven gateways across the whole project life cycles, starting at the go or no-go decision, then moving on through to needs confirmation and going right through to benefits realisation. So for the highest risk and highest profile projects,
00:07:28
Speaker
They have the most onerous requirements in terms of assurance reviews and reporting. They need to go through each of the seven stages of project assurance, and then they have periodic health checks and deep dives in between. But as I said, for the lowest level of risk projects,
00:07:44
Speaker
They really only have to go through the go on the no go stage and then the assurance is done by the agency. One of the things that I think makes New South Wales unique as well is that the assurance reviews are undertaken by independent experts. And so what that means is you've got these people who are experts in their field who are coming in to take a look at various aspects of the projects.
00:08:07
Speaker
which then gives project teams an opportunity to make improvements to their project. So it's not taken like it's an exam, it's these assurance reviews are really opportunities to make improvements to ensure that the project is fit for purpose and can be best delivered. Some of the aspects of that assurance review process that's really beneficial is that it involves interviews with key stakeholders.
00:08:31
Speaker
who are external to the project team and sometimes even external to government. And they can then give independent perspectives on various aspects of the project. And then those review reports go to elected officials to help make more informed decisions. So I think the important aspect is that it is across the entire lifecycle of a project. It doesn't just stop when the project goes into delivery, it continues on through the delivery and it goes right through to the benefits realisation stage. So it does give
00:08:59
Speaker
the project's a better chance of being able to achieve the benefits they originally set out to achieve. Thanks, Andrew for framing that out. It's really helpful to get that broad context on the New South Wales approach. One thing that stood out to me is the number of stage gates you mentioned, seven. So having seven stage gates might seem like a staggering number or significantly higher number than what might be used in North America. Can you help us understand those stage gates a bit more clearly?
00:09:22
Speaker
Does this result are the smaller stage gates that result in more focused analysis or they fairly comprehensive because some of our listeners might be used to a two stage or a three stage review and approvals process. Can you talk to us a bit about what happens in those seven stage gates at a high level?
00:09:35
Speaker
So the seven stage gates to go through it briefly is the go and no go, looking at the strategic options, a business case, readiness for market, tender evaluation, readiness for service and benefits realisation. So those stage gates can happen over a very long time horizon. It's basically from the very first conceptual
00:09:55
Speaker
idea for a project right through to when the project is in
The Seven Stage Gates for Assurance
00:09:59
Speaker
operation. For some major transport projects, major infrastructure projects, that might span 10 years. At each of those stage gates, for the highest profile and highest risk projects, you do go through a
00:10:12
Speaker
independent review by independent assessors and that happens over the course of about a week. There is an initial presentation by the project delivery team and they present to those assessors and then the next week there is a series of interviews with various stakeholders and people involved in the project or
00:10:31
Speaker
that might be from different parts of government, so the planning agency, the Treasury area, Premier and Cabinet, and also potentially with external stakeholders like the local government. And then the reviewers will prepare a report which then assesses the project across really seven key focus areas spanning from service needs,
00:10:52
Speaker
through value for money, social and economic and environmental sustainability, governance risk management, stakeholder management and asset owners, needs and change management. So it's very comprehensive and the reviewers will make recommendations that might be either critical, which they have to do immediately,
00:11:11
Speaker
essential, which are recommendations that need to be done over the medium term of the project or suggested. And ultimately, the reviewers will give the project an overall level of confidence, which might be low, medium or high. The low, medium or high level of confidence is to provide governments with a level of assurance around how confident
00:11:34
Speaker
the infrastructure assures that the project will be able to successfully move to the next stage. It is not a mechanism to say that a project should not go ahead or should go ahead. It's really to give the government and the decision makers confidence about what would happen or how well the project would be delivered if it does proceed to the next stage.
00:11:56
Speaker
Great. Thank you for providing that overview, Ingrid. It's helpful to get the whole picture of how these different stage gates function, what happens at each of the stage gates, and that role of the independent assurance. Because that is a fairly unique trait, I think, to the New South Wales approach, ensuring that especially those high risk projects get the critical view they need to make sure they're the right project for the public and are advancing in an efficient way. Well, then that might be helpful to think a bit about here as we talk about the life cycles, taking a step back about the different roles played by different actors and infrastructure planning
00:12:23
Speaker
You've alluded to a few of them in your overview of the lifecycle process, but it'd be helpful for us to understand a bit more about a few different key roles that I can speak generally. So we have a planning role, a deciding role, a funding role, and a delivery role. So the planner, the person coming up, or the agency coming up with the project.
00:12:39
Speaker
the end decision maker, who ultimately gives the go no go decision, the funder, where the actual money to build the project or operate the project comes from, and the delivery entity. So who's actually overseeing and managing the construction of any capital works associated with it. Can you talk a bit about how in the New South Wales context, who plays each of those roles and how this assurance function and the stage gate function across the life cycle fits into those different roles?
00:13:01
Speaker
Yeah, absolutely. So Infrastructure NSW, as well as being the Assurance Authority, has the authority and responsibility for preparing periodic state infrastructure strategies. So they are prepared about every five years, and that's a legislative requirement to look at the overarching needs of the state in terms of infrastructure. That sets the overarching
00:13:24
Speaker
kind of strategy for each of the individual agencies to develop sector-based strategic plans. For example, we have the New South Wales Water Strategy and we have the Future Transport Strategy among others. And then that then flows through into regional plans which are prepared by the agencies. Planning on a
00:13:42
Speaker
project level is done by the individual delivery agencies, which include, for example, Transport for New South Wales, Schools Infrastructure New South Wales, Health Infrastructure New South Wales and Water Infrastructure New South Wales. And then Infrastructure New South Wales, it's the assurance body has a role in overseeing those assurance functions. The funding decisions are ultimately made by the elected officials through cabinet processes and funding itself is provided from a combination of New South Wales and Australian governments
00:14:12
Speaker
and sometimes local councils and sometimes financing is provided through the private sector in the form of PPPs, they're most common for transport, hospital and jails. The agencies as project sponsors are responsible for project development and delivery.
00:14:29
Speaker
And they usually contract to the private sector for design and construction using various types of contracting models. And obviously in PPPs, the private sector will operate and maintain the infrastructure as well upon completion.
00:14:43
Speaker
You mentioned a number of different types of infrastructure in that response. We heard a bit about schools all the way through to major transportation projects through to your background at water infrastructure. That's a diverse array of projects and it sounds like infrastructure New South Wales is able to use a consistent approach across all that type of infrastructure, which I think would be fairly unique compared to many situations in North America where there might be a benefit cost analysis manual for rail. There might be a different way to think about investment in education.
00:15:10
Speaker
Can you talk a little bit about how this approach works across so many types of infrastructure, what that value is to New South Wales of that consistent approach?
Consistency Across Infrastructure Types
00:15:18
Speaker
Absolutely. The consistent approach creates transparency. There is a really great set of resources that Infrastructure New South Wales has, including templates for business cases, the resources for the reviewers. It allows standardization and creates an ease for decision-making on projects.
00:15:38
Speaker
And it really creates a consistency between projects of a similar risk profile. And I think the way that the framework is set up is that the themes are fairly broad. It's around service need. It's around environmental impacts.
00:15:53
Speaker
It might be around risk management and they're all things that are consistent across projects, even if the content varies. I think it is a very useful framework, which then can be tailored depending on the nature of the sector. I think the other benefit of having a consistent approach is it creates a discipline among project practitioners and they know how to approach projects and what expectations there are for developing and delivering projects within the New South Wales context.
00:16:21
Speaker
It sounds like the key differentiator there is where we might focus more on the content of the project in North America. Is it a steel on steel rail train? Is it a pipeline to carry water in New South Wales? It's really focused on the risk profile and the relevant risks for decision makers to consider in terms of assigning the level of analysis for each type of project.
00:16:40
Speaker
But I do understand and we'll move to business cases in a moment that there are specific guidelines and tools to develop that conduct that product specific analysis for the types of benefits and risks and costs that may only be related to one type of project. But it sounds like overall, the key focus in New South Wales is focusing the decision making assurance process on that risk profile of costs, ultimate technical deliverability, risk of benefit erosion and other risks to the public or stakeholders. Would that be a fair summary of that?
00:17:05
Speaker
Yeah, I think that is correct. It's really around, can we deliver this project and will we realise the intended outcomes?
00:17:12
Speaker
I think those are questions that certainly span all types of infrastructure, aren't they? I think that's a great segue to the next piece of the conversation on business cases. So in North America, things that look like business cases you might see in Australia have been used for decades. We also have a number of agencies moving towards a more formalized business case approach. And for those listening in, New South Wales and the Australian government do have fairly prescriptive or well-defined approaches to business case across a range of different types of infrastructure.
00:17:37
Speaker
In Ingrid, North America, we started to use business cases or other forms of structured decision making documentation in a few ways. The first is making fairly large and significant decisions, almost existential decisions for projects to make it go, no go, or to find the level of funding. A second family of decisions would be on how to optimize projects. So maybe deciding on number of stations on a Metro line or whether or not a number of crossovers are needed on a railway, or maybe thinking about different bus facilities that might be included.
00:18:04
Speaker
So not necessarily questions on whether or not we do the project on the whole, but ways to optimize the project. We also find that business cases are used in two types of general government processes. The first is what we'd say is petitioning the government for powers or funds for a new project. So public sector or private partners come up with the idea for a new project, make the case and go to elected officials and say, this might be an interesting project. Here's our case for it.
00:18:27
Speaker
The second format is working on a project that decision makers have directed agencies to develop to ensure it's optimized, reflects the public interest and is the strongest version of that project possible. Thinking about those four dimensions, big X essential go no go decisions, optimizing projects, petitioning government for powers or funds to build a project or optimizing a product that government's identified to move forward. Can you tell us a bit about the New South Wales approach and how it might fit into those four types of use or perhaps how it might be different or apply differently in the New South Wales context?
00:18:57
Speaker
I'd have to say that there's probably those four uses that do apply in New South Wales, but we have a more prescriptive or a more structured approach to business cases. So all projects over $10 million need to have a business case, though they can be light a touch.
00:19:13
Speaker
for smaller or low risk projects. And we have templates available on the Infrastructure New South Wales website and they are either for the light touch projects or for the more comprehensive business cases that are required. And business cases are really at two stages for projects in New South Wales. The first is the strategic business case. And that's a preliminary look at what is the service need? How does that align with government policies and priorities?
00:19:41
Speaker
What are the various options to address that service need? How would they be delivered? What are the costs and benefits? And then making a recommendation around the preferred option to progress to a final business case stage. And if the government accepts the recommendations from the strategic business case, we'll then move to a final business case. And that really takes the preferred option and makes the case for investment. It assesses the deliverability and that makes plans for implementation, including
00:20:12
Speaker
procurement plan, how the delivery phase will be governed.
00:20:16
Speaker
how the stakeholders will be engaged and managed through that delivery phase and how the risks will be managed and mitigated. And that final business case also identifies the preferred funding and financing options, which then is presented to government and they will make a decision about whether or not to proceed to the next stage. And really the way that the why business cases are used in New South Wales is they provide decision makers with the information
00:20:44
Speaker
They need to make evidence-based decisions about whether to move ahead with a project and to provide the government with confidence that sufficient planning has been completed to allow successful project delivery. We've actually got a couple of examples in New South Wales, including ones I've worked on, where they haven't proceeded to the next phase because they were found to either not be viable or while feasible, they were too expensive.
00:21:11
Speaker
didn't generate the relevant benefits and so they didn't progress beyond the business case stage. I think it's interesting. The key terms you highlight are credibility, confidence, so making sure decision makers are aware of the tradeoffs and consequences of a project going ahead or not going ahead. In the examples you mentioned, ensuring that they have full confidence in the sponsor's ability to deliver and realise benefits. One of the things I'm curious a bit about is
00:21:36
Speaker
How has the framework evolved to reach this point where you're able to accurately crystallize some of these tradeoffs and consequences and help build that confidence of decision makers? Are there any recent trends or developments that have helped the business case framework enable this effective decision making?
Evolving Business Case Frameworks
00:21:52
Speaker
Yeah, so Infrastructure NSW is actually set up back in 2014. So it's been around for a while and they have recently gone through a few improvements with their Infrastructure Investor Assurance Framework. The most recent version was re-released in October 2022.
00:22:08
Speaker
And earlier this year in February, the cost benefit analysis guidelines have been refreshed. So those have been really to take into account things like the recent trends we've seen in escalation, but also with the cost benefit analysis guidelines. It's included two really interesting developments. One is that the social discount rate has been reduced from 7% to 5%, which is required for all projects.
00:22:33
Speaker
And that really helps projects which have long dated benefits and particularly ones where they might be for regional populations where you've got a very large cost project but the cost is spread over a very wide population base. The other really important and interesting development in those new cost benefit analysis guidelines is there is a requirement for climate change to be taken into consideration when developing and delivering infrastructure. How that looks will depend on the sector.
00:23:01
Speaker
In the water sector where I work, we've actually done a lot of work in developing complex hydrology models, which consider climate change projections and how that impacts hydrology and water availability, which then feeds into our business cases. So we're actually, I think, in a really good position to take account of those requirements of the cost benefit analysis.
00:23:23
Speaker
So it sounds like a key shift. There has been moving from a quite steep discount rate to something that allows a bit more intergenerational thinking, noting that a lot of the projects underway are to support future growing population or the pressure of growing population or to provide benefits that expand beyond the current generation.
00:23:39
Speaker
It was interesting to hear your perspective, Ingrid, on the change to discount rate. And I think it sounds like that's reflective of a broader shift into looking at business cases as a tool to understand decisions that don't just impact current generations or current populations, but might also respond to growing populations or the pressures of growth and meeting wider policy goals. Right now in North America, we have a number of wider policy goals reflecting equity or climate change, any number of other topics that can sometimes put a challenge on the business case process.
00:24:05
Speaker
For example, analysis may have been traditionally heavily driven by traffic or volumes of passengers in the transportation space and hasn't always focused on some of those wider values that decision makers are interested in. You talked a bit about the past evolution of the business case framework and benefit cost analysis conducted by Infrastructure New South Wales in the past five or so years.
00:24:25
Speaker
But can you tell us a bit about what's innovative and what's next to try and capture some of these wider policies that are perhaps have always been pressing but are more pressing now than ever and are taking significant consideration from our decision makers? Yeah, so there's a few trends that we're starting to see. One is in relation to climate change and
00:24:42
Speaker
particularly focusing on sustainable procurement and how sustainability has
New Trends in Project Assessments
00:24:47
Speaker
been captured in the procurement strategies of the business cases that are being developed. The other one is really important in New South Wales, and that's around how to incorporate First Nations cultural values into the benefit-cost ratio. That's something we've had to grapple with a lot in our sector because a lot of our projects have impacts on First Nations
00:25:09
Speaker
cultural values or are actually beneficial to the First Nations communities, particularly when we're working in regional areas, given the importance that First Nations people place on water. We are also starting to see an emerging trend around taking into consideration resilience, which is really playing back into the impacts of climate change and how that will need to be factored into infrastructure designs and delivery.
00:25:33
Speaker
One of the other interesting developments that we've seen as well is Infrastructure NSW is also starting to move into assurance around asset management to ensure there's a consistent and improved approach to asset planning and delivery across government. So that's more on the operations and maintenance side, but they've recently released an asset management policy, which requires certain assurance gates around operations and maintenance, which I think is a really beneficial approach as well.
00:26:00
Speaker
are a lot of interesting directions for us to consider in North America. I know one that a lot of agencies we work with fast about is that last point on resiliency and climate and then the impact of resiliency and climate considerations on state of good repair. We do hear a lot of questions and a lot of thought being put into how do we better make decisions that allow us to understand the long-term requirements to keep this asset operational, but how do we make sure it's operational under a number of different scenarios, perhaps a sea water rise,
00:26:26
Speaker
or see what level rise in some of our jurisdictions or extreme heat or weather patterns that don't really resemble what we see today. Certainly an interesting challenge and one we'll be curious to watch North America's New South Wales grapples of the toolkits required to explore those pressing questions during the decision making process.
00:26:42
Speaker
You ended off there talking about assurance when we move to the third feature of the new south wales approach that we're talking about today on assurance i think one that's come across in all of our discussions so far today is that role of independent assurance you've articulated in grid that infrastructure new south wales high value on having an independent view of these projects and making sure that they've been fully reviewed analyze the value waited for their value and their deliverability risks are properly managed.
00:27:05
Speaker
We do see independent insurance emerging in north america as well and historically there's been a number of independent insurance roles played all those are typically played on specific projects maybe our highest risk highest cost projects we don't always see them across the whole spectrum of projects the way that you were articulating that for new south wales.
00:27:21
Speaker
We also see north america that is not always uncommon for the team that plans the project to also sponsor the project do the business case for the project and review the business case for it i think that might sometimes be a byproduct of a capacity constrained environment as many resources to review projects fully or different governance models.
00:27:38
Speaker
When we think about assurance in new south wales it sounds like you've been able to establish this independent role that doesn't necessarily impede sponsor momentum doesn't take up a lot of extra resources to conduct and also maintains is independent so the individuals the groups the organization is running the insurance aren't the same people designing planning or advocating for the project can you tell us a bit more about this assurance role and how you're able to so effectively run without slowing down projects are breaking momentum especially on some of these more complex projects that you're working on.
00:28:07
Speaker
Yeah, absolutely. So as I've mentioned a few times, Infrastructure NSW is the independent agency and they report directly to the Premier. They facilitate the assurance reviews, they don't actually undertake them themselves. What they do is they actually engage independent experts who might have had a career in construction, they might have had
00:28:25
Speaker
a career in planning system in government and now consult back to the New South Wales government. They might be from other jurisdictions as well to undertake these gateway reviews. They have different sectors and backgrounds that they've come from and different reviewers are used for different projects. It's really tailored to the individual projects.
00:28:48
Speaker
The Gateway review process is very standardised and there's, as I said, there's several key focus areas against which the reviewers make recommendations and assess the level of confidence and then provide an overarching level of confidence for the project around how confident they are for the project to move forward to the next stage. The project teams and project sponsors really understand the process and they factor this into their project planning.
00:29:17
Speaker
And as I said before, the reviews can be done very quickly. From start to finish, you can do it in as little as a month. And that is factored into the timeline of projects. The process is the project team and the project sponsor will upload the documents for the reviewers to start a review. Within a week, they have a planning day during which the project team gets an opportunity to present to the external reviewers around the project across the various focus areas.
00:29:45
Speaker
And then the week after that, the interviews are conducted with various independent and project team members to give the reviewers an opportunity to understand different perspectives on the various focus areas. At the end of those two days, the reviewers will meet with the project sponsors and provide them with the key findings and their thoughts.
00:30:08
Speaker
and then within another week or even a few days the project reviewers will provide the report back to the project sponsors. So it can be done very quickly and the review reports are then provided to government and that allows them to then make a decision about whether to provide funding for the next stage of the project.
00:30:25
Speaker
Ingrid, it's been interesting to hear about the assurance process as you described it. It sounds that there are a few items that might be quite interesting for our listeners in North America. Going back to what we talked about in the overarching lifecycle, that idea of allocating projects into a risk category and using that to shape the assurance, I think will be a helpful concept. There's no one size fits all approach, it sounds like, for projects, but there is some stratification and some standardization that allows different projects to have a predictable pathway through the lifecycle and a predictable amount of assurance.
00:30:52
Speaker
It sounds like some intention has been built into this process to minimize surprises or some people might say torpedoing a project at the last minute. I thought it was also interesting to hear about how even on the most complex projects that assurance process might only be a month. So it sounds like for me what you're describing isn't a
00:31:07
Speaker
kind of forensic review of tunnel schematics or a standard of operations or concept of operations review, but rather a more thoughtful strategic review of the key factors that will influence project success and failure. Could you maybe talk through a little bit more what that might look like if we take one of the more complex projects? I think a lot of our audience today may be sponsoring or planning or trying to deliver a mega project, several billion dollars, maybe curious to hear a bit more about how we can use assurance to improve the decision making process.
00:31:35
Speaker
So if I'm working on maybe a three or four billion dollar rail project, for example, what could that month look like in a bit more detail?
00:31:42
Speaker
So that month will really look like pulling all your documents together as a project team. You'll be pulling out the strategic business case or the final business case, depending on what stage you might be at. You'll be looking at providing the cost benefit analysis models, the costing reports by the costers, the various design reports and providing those, uploading those to Infrastructure NSW as portal so that the review team can commence their review of those various aspects of the project.
00:32:11
Speaker
It'll involve pulling together a presentation around each of those key theme areas to give the reviewers confidence about what the project team has done, what are the various elements you've already thought through and how the government can have confidence that the project can be delivered. And then it will be a matter of the review team confirming the interview list
00:32:33
Speaker
and those people coming through and being interviewed, it might involve someone from our biodiversity and conservation team, which is separate to the project team. It might involve someone from the New South Wales Treasury who's talking about the funding and financing. It might involve the local council on whose land it might be being built. And they will give the reviewers a different perspective.
00:32:53
Speaker
across those key theme areas and then ultimately what the project team will be provided is a report which probably is say 30 pages of content across those key theme, those focus areas with high level recommendations about how the project could be improved.
Identifying Risks and Facilitating Decision Making
00:33:09
Speaker
It might be at an early stage of the project around saying you've not actually thoroughly looked at all the options, we need you to go back and start looking at those options again. That's a fairly extreme example but it might also be
00:33:20
Speaker
a case where you've done a great job with stakeholder management. And we had a project where we recently received a recommendation like this. And this should be used as an example for other projects. So we have a recommendation that is not critical, but it's a kind of, you guys have done a fantastic job. And somewhere in between those two extremes, it'll be things like you need to go and get an independent costs review done of your costings.
00:33:43
Speaker
It's not going to be looking with a fine line at where you've placed a station entrance or exit. It's not going to be looking at the overarching pipeline diameter for a water project. But it might be a question of, have you actually considered this pipeline route and the risks that are involved with the particular pipeline route?
00:34:02
Speaker
that might be related to land acquisition or the like. So it's trying to really identify where there's risks or hiccups that might come into a project in the future and ensuring that those are being acknowledged by the project team and being able to address them before the project goes forward or as part of the project going forward.
00:34:21
Speaker
It sounds like this process has been developed to achieve a few things. I think the first thing I really hear there is the ability to conduct an efficient review and help government augment the outcomes of her project or understand how to best advance the project going back to that theme of confidence we've talked a lot about today. It also sounds like the process as it structured allows for a lot of institutional knowledge to be generated infrastructure, New South Wales, as well as through the different independent reviewers who get involved in these projects so that a further efficiency can be unlocked. If you've reviewed three subway projects or four water pipelines in the last three or four years,
00:34:51
Speaker
doesn't seem like that knowledge boils off. It's retained in the organization and allows these reviews to move forward seamlessly. One element we found as a common in all countries working on infrastructure is the individuals involved in planning, reviewing, and assuring projects have as much of an impact on the outcome of the product as these frameworks and tools themselves, depending on the expertise you bring, the skill sets you bring,
00:35:10
Speaker
How does Infrastructure New South Wales find the experts to connect the assurance process and make sure you're developing that knowledge and following the process as described, but still having that openness to explore new angles or new factors in these projects that might shape success?
00:35:25
Speaker
Infrastructure NSW uses a range of independent expert reviewers and they come from various different sectors. A lot of them come from other states of Australia or potentially from NSW as well. They might have been senior government officials who have retired. They might have been fairly significant players in the construction sector.
00:35:47
Speaker
They might have been academics and university professors or currently are from those fields. And they also ensure that the independent experts are not conflicted, obviously, and don't have any conflicts of interest and that they are appropriate to where that project's up to and what some of the key challenges are for that project. For example, for a water project that's at a final business case stage, you might be getting someone who has some background in constructability and construction.
00:36:16
Speaker
And you might also get someone who's an expert in costings because those two elements are really critical to understand, well, have you got your costings right? And have you got your constructability right? The experts might differ for a project across different stages because it has a different need. But there's often a common theme of who these experts are on an individual project. So you get some consistency across the various stages of project lifecycle.
00:36:39
Speaker
One last one on the independent experts. How are these paid for? I can imagine some people might be wondering, getting a room of experts together when they've already perhaps procured consultants, engineers, architects, economists to develop these projects might be at another cost. Is that just part of the capital profile or is it a budget that New South, Infrastructure New South Wales has? How does this all get paid for?
00:36:58
Speaker
The project team actually, or the project actually pays for the reviews. They are fairly low cost because they're short and sharp. They tend to be anywhere between $40,000 to $50,000 Australian dollars, so $30,000 US dollars for a gateway review. And for health checks and deep dives, they're a lot less expensive. They're sort of a quarter or half that price.
00:37:22
Speaker
But it is something you do need to factor into the project budget, but on a billion dollar project or a multi-billion dollar project, it's fairly small scale.
Ensuring Deliverable and Beneficial Projects
00:37:30
Speaker
Yeah, I think that's helpful to consider. Because one thing that really stood out to me in this conversation is a lot of the technical due diligence that happens in North America is just that. It's focused on, is this subway going to be safe to operate? Is the construction appropriate and following relevant fire codes and engineering standards, which is absolutely crucial. And I'm sure that happens as part of the design process in New South Wales as well. But I think what you're really describing here is almost a due diligence on the decision-making process, making sure all the right information has been considered, that the product's being treated,
00:37:57
Speaker
fairly inconsistently, that key risks and rationale and requirements for the product are well understood and documented in past muster, if you will. And it's not so much a process to, again, do that technical due diligence, the engineering review, it's more of a decision making review is almost the way I think about it. That's absolutely right. And I think, as I said earlier, it's really around, is this project going to be able to be delivered? And if it is delivered, is it going to achieve the outcomes the government is seeking to achieve?
00:38:26
Speaker
So you can almost think of it as a thin slice of value added on this assurance function rather than, again, a comprehensive shadow engineering process or a critical review of the design in detail, which I think is really helpful to understand. And a feature that certainly many jurisdictions in North America don't really deploy in their decision-making frameworks. A last thought on this before we transition to the final part of our discussion today is
00:38:46
Speaker
I'm sure the point of an assurance function isn't to rubber stamp or green light every project. There may be dissenting reviews, both in terms of the review coming back saying the product isn't ready, the government shouldn't have confidence in moving it forward, or you may have even disagreements among the independent reviewers on the level of confidence a product should have. Tell us a bit about how that works in the assurance process. What happens when the reviewers, either entirely or impartial, are not sold on the idea of advancing the product? They don't have that critical confidence.
00:39:14
Speaker
So the reviewers do try to stay fairly impartial. The reviews aren't an exam. What they do is they give the government a level of confidence in the project moving forward. And that's either low, medium or high. And the reviewers make recommendations on things that are either critical to do. They must be done before the project can move to the next stage.
00:39:36
Speaker
essential, so it needs to be done, but it can be done during the next stage of development or delivery or their suggested recommendations. I don't actually have the background as seeing how the discussions go among the review teams to know what happens amongst dissenting reviewers, but I'm sure it happens. But ultimately they do come to an agreement and there is a head of those external experts.
00:39:58
Speaker
who is really the lead on that review process. So ultimately, I assume they have a say. Even if a project gets a low confidence rating with several critical recommendations, an elected official can override the review recommendations and progress that project. But they will do so in the knowledge that there are critical recommendations that aren't being addressed and that the reviewers do not have confidence in that project moving forward. So there is
00:40:25
Speaker
ultimately a decision that can be taken but they would do that with their eyes open and understanding the level of risks in taking that approach. It's helpful to understand that concept but it's not an exam and it's almost not jury duty. There's no ultimate verdict. It's about structuring recommendations to give to decision makers and ultimately it's not a decision making process. It's an advice to decision maker process. It's about helping decision makers understand how any independent expert in the field might feel about the project moving forward.
00:40:52
Speaker
informed by their diverse technical experience. But I think it all boils back to our theme today on generating confidence and helping decision makers understand how the more technical or professional body of involved in the project would be confident if the project moved forward. We ended that part of the conversation thinking a bit about elected officials and how they might interact with the independent assurance. So why don't we move to the last part of our conversation on the role of elected officials and the public in the infrastructure New South Wales approach to decision making and product advancement. I think the processes we talked about today sound robust.
00:41:20
Speaker
They sound effective. You talked about the efficiencies that have been built in. The desire here isn't to create more analysis paralysis. The desire here isn't to slow projects down. It's about building momentum, but making sure there's confidence and credibility behind that momentum. One of the things I want to talk a little bit about is the role of the public or key stakeholders and the ultimate role of elected decision makers in this process.
00:41:41
Speaker
One concern we hear in North America as we develop decision-making framework is what's the role of the public going to be? How do we engage with our elected officials in this decision-making process? And how do we fit it in with our governance? And I think while the explicit governance between Australia, Canada, United States may be different,
00:41:57
Speaker
I think there's some common values on transparency, on engagement, on the democratic process that we can see in action in Australia and perhaps learn a little bit about North America. So could you explore that idea, the idea of collaboration between the public and decision makers as part of this New South Wales model for infrastructure advancement?
00:42:14
Speaker
So normally the community is engaged throughout the life cycle of the project in terms of development and delivery stages, though it really will vary by project and by agency. And as well as it will vary with the degree of sensitivity of the project and whether there is some particular sensitivities that need to be managed. But it's actually a requirement and one of the areas which are assessed under a gateway review process.
00:42:39
Speaker
is around stakeholder engagement, what the approach is, how well stakeholders have been engaged, and what the community feedback has been on the process. Normally, the way that we will engage with the communities through information sessions, through one-on-one stakeholder engagement, and also through Have Your Say on
The Role of Community Engagement
00:42:59
Speaker
various reports at different stages of the project.
00:43:02
Speaker
One of the resources Infrastructure New South Wales has actually put out is a guide for agencies and project sponsors around
00:43:10
Speaker
what type of information and how detailed it should be at each level of project development. So very early on in the project lifecycle, what should we be telling the community about the cost, the timeframes in particular. And as you move forward, those costs and timeframes can get more, less of a range and more of a specific. So they have provided guidance to the community, to the project delivery agencies on that.
00:43:37
Speaker
So, Ingrid, thank you for that overview of community engagement, and I think that's a crucial element to product development here, especially as we serve diverse communities and populations, many with different needs, and many who require different things from the infrastructure we might be building.
Involvement of Elected Officials
00:43:51
Speaker
Another element of this final theme before we close out today is the role of elected officials. Now, previously, you mentioned that elected officials might receive
00:43:58
Speaker
the recommendations from the assurance process and review them, but how else do elected officials work in this process? Because it seems to me that this again is a decision support framework, not necessarily a decision making framework. Sounds to me like the decision maker is still the decision maker, but this framework has been developed to assist them in that role. Can you tell us a bit about how that role plays out more specifically in New South Wales?
00:44:20
Speaker
Yeah, so elected officials do still play a really important role and are ultimately the decision makers. Usually the elected officials are briefed regularly on project process and progress, including through monthly and quarterly reports to Cabinet, depending on the level of risk of the project. And those reports cover how the project is tracking against key metrics.
00:44:43
Speaker
They're a really comprehensive overview, but they are very short and sharp. Infrastructure NSW is actually responsible for coordinating and preparing those packs to go to Cabinet on those infrastructure projects. The role of elected officials in decision making, it's normally limited to when the project is seeking funding and or approval to move to the next stage. So they don't have influence on the day-to-day decisions of a project, but they will have an opportunity to make decisions on
00:45:12
Speaker
funding and financing and project progress. So if I'm hearing you right, it sounds like there's some key similarities in North America. Decision makers are really focused on the macroscopic view of the project. If we use a subway example, it's what's the line on the map? What are the stations? What's the overall scope? They aren't necessarily saying move that entrance to the left 10 meters and maybe turn that escalator into an elevator. It's very much focused on the macroscopic issues. And they're using a combination of the business cases developed at each stage gate and the assurance notes through briefings
00:45:41
Speaker
to inform their decision on those go-no-go allocate funding or allocate powers if needed decisions to advance a project. Would that be a fair summary? Yeah, that's absolutely right. They also obviously have a fairly large role to play in terms of the media announcements because all elected officials do like having a good media announcement when there's a ribbon to cut or a stage to open.
00:46:03
Speaker
Certainly there are a wide array of roles played across the lifecycle by all actors, including our decision makers. I think we've had a great conversation today spanning a range of topics. First, we talked about the lifecycle and how there are seven stage gates used to answer different questions about projects throughout the lifecycle with projects stratified by risk and that risk stratification defining which stage gates they need to go through and the level of analysis required.
00:46:25
Speaker
We then talked about the business cases used to navigate decisions at each of those stage gates and some of the emerging trends that new south wales is working with in the business case field whether that's changing discount rates to recognize the long term benefits of these projects.
00:46:38
Speaker
or incorporating key priorities such as climate change into the decision making toolkit, the business case analysis toolkit. We then talked about assurance and how it's an independent and very lean and efficient process to make sure that decision makers have a full view of a project before approving the next stage of development. We finally closed out with the ultimate role of the public and decision makers in developing these projects.
00:46:59
Speaker
Ingrid, I think one that really stood out to me, and I've mentioned this a few times in our conversation, is that overarching theme of confidence.
Building Confidence in Project Readiness
00:47:04
Speaker
This process wasn't developed to add significantly more technical work, design work, modeling, forecasting. It really sounds to me it's about asking the important and crucial questions as a product matures or evolves that and ensure the teams behind it, the planners, the designers, the sponsors, the funders, and ultimately the decision makers do have that confidence and carry it through the life cycle.
00:47:23
Speaker
I think that confidence as you described it really is broken down to a few dimensions first is this project ready for the next stage is there a credible plan for it to move forward second we have confidence it's still the right project at the right time and finally we have confidence the product is gonna be delivered the right way to be of confidence that the delivery model procurement model in the approaches to brings product to life are appropriate and sound.
00:47:44
Speaker
So we appreciate you taking the time today to talk us through this model. Again, I've learned a lot from our conversations and think there's certainly many lessons that carry over directly to North America and maybe carry over a bit metaphorically or indirectly to our various jurisdictions on the continent. Would you like to share any closing thoughts before we close our podcast today?
Closing Thoughts: Lessons for North America
00:48:00
Speaker
No, I'd like to just thank you for the time. It's been really interesting talking to you and learning more about the way that the assurance process operates in Canada and the US in particular.
00:48:11
Speaker
Great. Thank you, Ingrid. Look forward to future conversations on all things infrastructure planning and have a great rest of your day. Thank you.